Thomas Friedman:

"The World is Flat" (2005)

(Copyright © 2011 Piero Scaruffi | Legal restrictions - Termini d'uso )
Thomas Friedman's book focuses on the way new technology has enabled anybody anywhere to compete and/or cooperate with anybody anywhere else.

He starts out by identifying the crucial factors that enabled this revolution: 1. Personal computers made computers cheap enough that every organization and many households got one; 2. Fast cables were laid down all over the world by multinationals and governments; 3. Software (a lot of it free of charge) enabled those computers to work seamlessly together.

These factors de facto created a new kind of factory, an industrial and commercial platform that can distribute the workload all over the world. The point that Friedman is that "the playing field is being leveled".

The first chapter of the book is a bit confusing because he tries to conflate technological events and political events. Writing after the Al Qaeda attacks on the USA, Friedman mentions how the Internet can be used by terrorists. History proved that the real change came from kids in the Arab world who used the Internet to start democratic revolutions. And history showed that the real threat to USA domination was not a bunch of wild terrorists operating from caves but the mighty nations of China, India, Brazil, etc (George W Bush made the same strategic mistake, which has probably cost a fortune to the USA).

Friedman mentions that the Internet boom took place roughly at the same time that the Soviet Union collapsed, and even claims that the high-tech boom was the main reason for that collapse (Friedman does not mention the factor that most Russians would name first: the war in Afghanistan), but very few Russians (let alone Ukrainians or Kazaks) knew anything about what was going on in the USA (in fact, not even Italians or Spaniards knew what email was in 1989).

He is right though that the collapse of communism was one of the factors that accelerated the "flattening" of the world. In fact, he doesn't consider a simple case study: what if there had been no high-tech boom but still a collapse of communism? My hunch is that the flattening would have still occurred. Jobs would have been exported all over the world, just not high-tech jobs. Friedman neglects the fact that most outsourced jobs are in shoes and textiles, not in Information Technology. Friedman also neglects the fact that the "flattening" had already been underway since the 1950s, although only in one region of the world: the West. Companies based in the USA routinely offsourced work to European and Japanese companies, that were able to "compete" with the manufacturers based in the USA ("compete" the same way that India competes with the USA for jobs). That's how Japan and Germany became the second and third largest economies in the world. In other words, Friedman confuses cause and effect: the outsourcing of high-tech was one of the many things that got offsourced once the whole world opened up to Western capitalism, just like shoes and textiles.

Friedman also misses the chain of events: the fall of communism turned many poor countries into capitalist countries, and, because they were poor, these countries offered a very cheap labor force, and, because labor was cheaper there, Western multinationals offsourced jobs to the developing world. Then progress in computers and telecommunications sped up this process. It all starts with communism: it was a blessing to capitalism because it created so much poverty that now capitalism can exploit. In fact, it all started even earlier, when the former colonies of the European empires became independent. Most of them flirted with fascism and communism. The fall of the Soviet Union removed that polarity and left only one system.

Friedman divides the history of globalization in three stages: from the discovery of America to 1800, in which the European empires shrank the world a bit; from 1800 to the Internet boom, in which multinationals shrank the (Western) world another bit thanks to progress in transportation and telecommunications; and from the fall of communism to today, in which the individual (able to communicate with other individuals worldwide) has become the force shrinking the world thanks to personal-computing devices, Internet and fiber optics. He views the Internet as the watershed event between the second and third stage. I think that the triumph of capitalism was a more important event. After the collapse of communism, the whole world went capitalist and that's what "leveled" the field.

Friedman credits the latest revolution on a "triple convergence": a set of new players, i.e. China and India, that originated from the fall of communism; the new "flat" platform created by personal computers, Internet and fiber optics; and new "horizontal" business processes that promote "connect and collaborate" over "command and control".

I think that Friedman's historical foundations are shakey. He needs to study the Roman Empire, the British Empire and even the Mongol Empire, all systems that had similar "globalization" going on. He is paranoid about the outsourcing of high-tech jobs because that's the kind of job that you outsource in the age of high-tech services, but he does not really make the point that outsourced high-tech is significantly different from previous outsourced industries. (What is significantly different is the willingness of the reigning superpower to let this happen, but that's another story).

Friedman makes some semantic mistakes too. His narrative is actually two or three narratives that he merges as if they were the same thing because they happened at the same time. In particular, the subject keeps shifting from globalization to the web. Of course, that's because his super-subject is the "triple convergence", but it helps to keep them separate. Globalization was happening and would have happened anyway (he correctly quotes Marx as having predicted it 150 years ago). The whole phenomenon of the Web may have sped up globalization (at least as far as the software industry goes) but that's not really proven (other than for the software industry). He does mention other factors, like the modern supply chain, but not many other technological improvements that made the modern supply chain possible (e.g., port management or couriers). The other narrative that he has is about the individual being empowered in unprecedented ways. Granted: more people in more places have the power to access the Internet and all that comes with it. It is certainly true that the Western worker has lost his absolute advantage: it used to be that a dumb Westerner was more likely to find a job than a smart Chinese or Indian, while now the technology is "flattening" the field and a smart Chinese or Indian can be hired to work for a Western company (although Friedman neglects that immigration laws still make it very difficult for a Chinese or Indian to get most of the highly-paid jobs). However, this "flat world" is not flat if one considers "what" they access, which Friedman mentions only in passing. For example, in theory each individual on the planet can access all the information in the world that has been turned into webpages. In practice, though, the vast majority of people content themselves with the first few results of a search. The search engine decides what people actually see, and that's only a tiny fraction of the web. It turns out that the vast majority of those pages are produced by large corporations. In theory people have never had so much freedom to absorb knowledge, but in practice they only absorb what search engines make it easy for them to absorb. In theory you can "connect and collaborate" with everybody, but in practice nobody wants to connect and collaborate with you because they can't find you.

Alas, the bulk of the book is a list of ten (of course, it had to be the magic number "ten") forces that are shaping the third stage of globalization. These ten forces are mainly one: the labor market. Any fresbman of Economics could tell him that are many more forces at work (like the financial games that caused the Great Recession or the price of commodities that is shaking the world in 2011 or the USA's budget and trade deficits that may reverberate for generations to come). Worse: Friedman is a journalist who has easy access to celebrities, and he indulges in interviewing them. He tries to demonstrate his points by quoting powerful people in the business. This is only anecdotal evidence, and several of those powerful people are not judged well today with hindsight.

It gets worse in the second half because Friedman decides to wear the hat of the political pundit. He starts prescribing this and that cure for pretty much every country in the world. This is dangerous business even for professional historians. For example, Friedman derides the European welfare state, but in 2011 Germany is the success story of the West and its success is largely due to a centralized economy. He is enthusiastic about the globalized model of outsourcing, but it's a model that can be sustained only if it is able to create jobs to replace the ones that have been outsourced; and the jury is still out on this one. Friedman writes that is an infinite number of knowledge jobs out there, but doesn't quite explain where this ambitious statement comes from. His optimism flies in the face of his own theory: if the field is being flattened, why in heaven should knowledge jobs remain in the USA? He himself quotes statistics that show how rapidly the number of foreign graduate students is increasing compared with the number of USA students. There is no reason why it should be otherwise in a flat world. And he himself notices how students in the USA are deficient in science and math. It all there was to it was the flattening of the world, it would just be a matter of time before the knowledge jobs were outsourced too. Luckily, as he himself eventually realizes, there is more to the USA than just companies and workers: there is a complex system of laws, institutions and values that sets the USA apart from the rest of the world. It is a lot easier for China to make shoes than to make democratic reforms. And not many Chinese students want to live in the Chinese dictatorship, given a choice to stay in the USA.

It is easy to agree with him when he worries about the decline in the USA of education and infrastructure (relative to what Asia is doing with its schools, railways, telecommunications and energy), and when he points out that the problem starts with parenting. He calls for a national transformation along the lines of the one that made the USA win the Cold War against the Soviet Union. He calls for an energy policy and many other things. By the end of the book, it is beginning to sound like he wants to run for president.

After having provided advice for his own political leaders, Friedman even sends advice to developing countries. He thinks that the countries more likely to succeed are the ones that are open to foreign ideas and that value education, and points out how the Islamic world is failing on both (again, he's writing just after the Al Qaeda attacks).

Back to Friedman's original point, echoed in the title of the book, that "the playing field is being leveled": is it? Shifting production from one region to another region of the world has been done for centuries (although never at this speed and in this magnitude). That, per se, does not "level the field" if one center retains the dominant creative position. In other words, are the Indian engineers of Bangalore doing the same job that the Silicon Valley engineers are doing? Obviously not. Silicon Valley engineers are designing smartphones, tablet computers, ebook readers, social networking platforms and things that don't have a name yet, whereas Bangalore engineers are simply writing code for unknown products and answering phone calls by distraught customers, and Chinese engineers are manufacturing chips and screens for unknown devices. Everything else being equal, this partitioning of work would simply create different centers of excellence, no matter how interconnected they will be. However, there are so many forces at work, and some of them are relatively invisible, that the world will probably be a much different place in the 21st century, but those forces are beyond the scope of this book. For example, it is not certain at all that free-market capitalism will continue to be the reference model for the whole world: China is increasingly becoming a case study for developing countries from the Middle East to Africa, and at least one alternative (Islamic fundamentalism) has briefly attained cult status in one region of the world. It is easy to predict that something else will surface in every decade. Furthermore, Friedman mentions the old adage that outsourcing menial jobs helps companies focus on sophisticated jobs, but i think this was mainly due to cheap labor costs elsewhere (Michael Sandel famously demistified the "flat world" paradigm saying that it is "just a nice name for the ability to hire cheap labor in India") and, even if free-market economies remain the same, things will change as labor gets more costly in the developing world (See my article Another threat to USA domination: the success of the high-tech industry). Friedman writes that "low-wage, low-prestige jobs in America . . . become high-wage, high-prestige jobs" in India, but that's simply due to the different value of the dollar and the rupee: let the rupee appreciate against the dollar and you'll make the inverse sentence true. There is also something inherently odd about this "flat" world. The big success stories of the 21st century in the USA, so far, are Google and Facebook. These are companies that sell an advertising platform, that make money out of the advertising related to a free service. That's the equivalent of the free magazines. That's the equivalent of the billboards by the highway, but on an unprecedented scale. Meanwhile, the success stories in India and China are of companies selling real services or making real goods. Last but not least, the "flattening" that Friedman analyzes a bit superficially has had fundamentally different effects on India (the capital of software outsourcing), China (that mostly manufactures traditional goods, from textiles to shoes), Taiwan (the capital of hardware outsourcing, but that became so way before the advent of the Internet) and Japan (that became the capital of consumer electronics). If the world is indeed flat, where are the Indian and Chinese companies outsourcing jobs to the USA or Japan? There are vast differences in the forces at work in different economies: the world is not flat at all.